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Option Market Alert: Amazon.com Inc Implied Price Swing Hits An Inflection Point




Amazon.com Inc (NASDAQ:AMZN) Risk Hits An Inflection Point

Date Published:

No Risk Alert Here: Before we dive into any analysis we simply note that Amazon.com Inc (NASDAQ:AMZN) risk is neither elevated nor depressed. We'll detail it below -- but that's the lede -- the option market is in a holding period with an IV30 of 42.78% versus the IV30 of the S&P 500 at 17.71%. You might say that the post it note for Amazon.com Inc would read, "holding pattern." The annual high for Amazon.com Inc IV30 is 51.67%.



To skip ahead and see if buying or selling options has been a winner in Amazon.com Inc, you can go here: Getting serious about option trading.

PREFACE
This is a proprietary risk rating and risk alert system that looks forward for the next month -- or really 30 days to be exact -- and that includes weekends. The system is based on multiple interactions of data points, many of which come directly from the option market for Amazon.com Inc (NASDAQ:AMZN) . The creator of this model is Capital Market Laboratories (CMLviz.com).
Option trading isn't about luck -- this four minute video will change your trading life forever: Option Trading and Truth

In the "Why This Matters" section at the end of this article on Amazon.com Inc we're going to take a step back and show in great specificity that there is actually a lot less "luck" in successful option trading than many people know. The whole concept of an "option trading expert" is vastly over complicated and we'll talk about how superior returns are earned.

But first, let's turn back to AMZN and the company's risk rating:

We also take a peek at the implied vol for the Technology ETF (XLK), our broad based proxy for AMZN.





SNAPSHOT SUMMARY
S&P 500 IV30     17.71%
Nasdaq 100 IV30     23.14%
XLK IV30     22.3%

AMZN HV 30     35.41%
AMZN Current IV30     42.78%
52 Week Low IV30     16.05%
52 Week High IV30     51.67%


The implied price swing risk as reflected by the option market has hit an inflection point relative to the company's past. The option market reflects a 95% confidence interval stock price range of ($1,287.50, $1,566.60) within the next 30 calendar days.

AMZN OPTION MARKET IMPLIED PRICE SWING RISK
The IV30® is the implied price swing risk reflected by the option market in the stock price for the next 30 calendar days -- it's forward looking. Amazon.com Inc shows an IV30 of 42.8%, which is an inflection point for the company relative to its past.

The option market for AMZN has shown an IV30 annual low of 16.1% and an annual high of 51.7%, meaning that AMZN is at the 75% percentile right now. Here's a table of the data before we dig into the implied price swing risk rating further.

AMZN
Current IV30    
AMZN
Low IV30    
AMZN
High IV30   
42.8% 16.1% 51.7%

The implied stock swing risk from the option market reflects a wider range in the next 30 calendar days for Amazon.com Inc (NASDAQ:AMZN) than it has on on average.
Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 35.41%.




We have a situation now where not only is the IV30 elevated relative to the past, but the option market reflects the likelihood of yet more stock movement in the next 30-days than it has in the last 30-days. Let's turn to a chart to see what's going on.
 
Note how much higher the forward looking stock swing price risk for Amazon.com Inc is priced (42.8%) compared to what happened just in the last 30-days (35.4%).

Amazon.com Inc Risk Rating
The AMZN risk rating is at 3, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 3 rating are:

The IV30 is above the annual average.
The IV30 is above 40%.
The HV30 is above the 80th percentile.
The IV30 is above the HV30.
The stock has moved +9.3% over the last 3-months which does indicate some elevated risk.